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It’s Better

Question: How does it get better when it gets worse? Last week we had a jobs report from Washington that there were fewer jobs created than they had anticipated, but the stock market took that as good news and the DOW had a strong rally. WOW! The bad news somehow turned into good news because the unemployment rate dropped one tenth of one percent.

Enronization

Even if you don’t own any of their stock or any stock at all you will want to read this. What Enron corporate officers did with their accounting firm is nothing new. It has been going on for years, but recently has become more egregious. Hiding facts from stockholders by showing Annual Reports with tiny footnotes has been happening for years. Even experienced accountants have trouble understanding what various financial statements mean. What chance does the little investor have? And that is the whole idea. The insiders don’t want the outsiders to know what they are doing with the company money.

More Window Dressing

Two weeks ago I wrote about what the Securities and Exchange Commission was doing to regulate the mutual fund industry to help the small investor, the “poor folks”. It really added up to zero. Now the SEC is going to make new regulations for hedge funds to protect the rich folks. And it is more window dressing. In fact, it looks downright stupid. When I say rich folks it is because in order to qualify to invest in a hedge fund you must have assets of one million dollars and income of $200,000 per year for a single person and $300,000 for a couple.

Investment Clubs

Because you don’t feel too sure about which stock or mutual fund to buy you decide to become a member of an investment club. Each of the members contribute a certain amount of money each month and then meet to decide what to buy or sell.

It’s A Duck

If it walks like a duck, quacks like a duck and looks like a duck it must be a duck. In the stock market if there are more buyers than sellers, more stocks are going up than down and the trend of the general market is higher it must be a bull.

Emotional Maturity

If you are going to be a winner in the stock market you must have emotional maturity. I did not say you had to be smart or know how to pick stocks and mutual funds. Once someone buys a stock or mutual fund he immediately seems to have a love affair with it. It can become a fatal attraction that can lead to disaster.

Market Timing?

The recent criminal fiasco in the mutual fund industry is being used by Wall Street to persuade investors that market timing is a bad thing. The late trading by Janus, Bank America and several other well known mutual funds is falsely being called market timing.

Inverted Interest Rates

Inverted interest rates? What’s that? Who cares? Even if you don’t understand what Mr. Greenspan is saying (and almost nobody does) it is important to you because it could mean you might lose you job next year or have to cut back on some of the things you want to acquire.

Economists #2

Economists know more about how the fragments of society work than anyone. In school they are taught to break down the economy into its tiniest parts and to quantify each minutiae so it can become part of a formula. Once done those econometric formulas should become a viable equation to predict how the total economy will react when a change occurs to any part of the formula.

Market Psychology

Today we are inundated with tons of information about the economy, stocks, government agencies and foreign governments. They show us charts and graphs of the increase/decrease in oil production over the last 5 years, the amount of maple syrup produced in Vermont for the past century, the time it takes to bounce a signal off the moon and all kinds of other nonsense that we can live without. The talking heads on the investment programs, both radio and TV, tell us how this is going to affect the price of certain stocks and the market in general. Well, maybe.